1. SUPPLY AND DEMAND: HOW MARKETS WORK

2. A market is a group of buyers and sellers of a particular good or service. MARKETS AND COMPETITION

3. Buyers determine demand. Sellers determine supply

4. DEMAND Quantity demanded : the amount of a good that buyers are willing and able to purchase. Law of Demand The quantity demanded of a good falls when the price of the good rises. # Demanded $

5. Cat’s Demand Schedule

6. Cat’s Demand Curve Price of Ice-Cream Cone 0 2.50 2.00 1.50 1.00 0.50 1234567891011 Quantity of Ice-Cream Cones $3.00 12 1. A decrease in price... 2....increases quantity of cones demanded.

7. Change in Quantity Demanded Movement along the demand curve. Caused by a change in the price of the product.

8. 0 D Price of Ice- Cream Cones Quantity of Ice-Cream Cones A tax that raises the price of ice-cream cones results in a movement along the demand curve. A B 8 1.00 $2.00 4 Change in Quantity Demanded

9. SUPPLY Quantity supplied is the amount of a good that sellers are willing and able to sell. Law of Supply The quantity supplied of a good rises when the price of the good rises. $ # supplied

10. Ben’s Supply Schedule Price of Ice cream cone Qty. of Cones supplied

11. Ben’s Supply Curve Price of Ice-Cream Cone 0 2.50 2.00 1.50 1.00 1234567891011 Quantity of Ice-Cream Cones $3.00 12 0.50 1. An increase in price... 2.... increases quantity of cones.

12. Change in Quantity Supplied Movement along the supply curve. Caused by a change in the price of the product.

13. 1 5 Price Quantity of Ice-Cream Cones 0 S 1.00 A C $3.00 A rise in the price of ice cream cones results in a movement along the supply curve. Change in Quantity Supplied

14. Airline Tickets $QDQS 200241 3001610 4001016 500422 600025 600 500 400 300 200 100 0 Price $ 0 2 4 6 8 10 12 14 16 18 22 24 26 28 Quantity # D S 350 13

15. SUPPLY AND DEMAND TOGETHER Equilibrium Qs= Qd Law of Supply and Demand: The price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.

16. At $2.00, the quantity demanded is equal to the quantity supplied! SUPPLY AND DEMAND TOGETHER Demand ScheduleSupply Schedule

17. The Equilibrium of Supply and Demand Price of Ice-Cream Cone 0123456789101112 Quantity of Ice-Cream Cones 13 Equilibrium quantity Equilibrium price Equilibrium Supply Demand $2.00

18. If the price is too high (Qs > Qd)… Price of Ice-Cream Cone 0123456789101112 Quantity of Ice-Cream Cones 13 Supply Demand $3.00 Quantity Supplied Quantity Demanded $2.00 The Price Will Drop!

19. If the price is too low (Qd > Qs)… Price of Ice-Cream Cone 0123456789101112 Quantity of Ice-Cream Cones 13 Supply Demand $1.00 Quantity Demanded Quantity Supplied $2.00 The Price Will Rise!

20. Changes in the market price Doctors discover coffee is known to decrease the effects of aging? A hurricane destroys half the supply of oranges. Researcher find that chocolate may cause cancer.